Premium
Integrating Social Network Effects in the Share‐Of‐Choice Problem
Author(s) -
Gunnec Dilek,
Raghavan S.
Publication year - 2017
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/deci.12246
Subject(s) - social network (sociolinguistics) , computer science , product (mathematics) , market share , order (exchange) , network effect , new product development , construct (python library) , conjoint analysis , social network analysis , marketing , operations research , microeconomics , business , economics , social media , mathematics , world wide web , geometry , finance , preference , programming language
Accounting for social network effects in marketing strategies has become an important issue. Taking a step back, we seek to incorporate and analyze social network effects on new product development and then propose a model to engineer product diffusion over a social network. We build upon the share‐of‐choice (SOC) problem, which is a strategic combinatorial optimization problem used commonly as one of the methods to analyze conjoint analysis data by marketers in order to identify a product with largest market share, and show how to incorporate social network effects in the SOC problem. We construct a genetic algorithm to solve this computationally challenging (NP‐Hard) problem and show that ignoring social network effects in the design phase results in a significantly lower market share for a product. In this setting, we introduce the secondary operational problem of determining the least expensive way of influencing individuals and strengthening product diffusion over a social network. This secondary problem is of independent interest, as it addresses contagion models and the issue of intervening in diffusion over a social network, which are of significant interest in marketing and epidemiological settings.